Cashback and Cash Advance are two concepts increasingly present in financial daily lives, especially for those who use bank cards frequently. Despite sharing the term “cash”, they refer to distinct mechanisms with very different implications.
It is essential to understand these differences to make more informed decisions in personal budget management. Incorrect use may represent considerable charges. The idea of getting money or advantages through a simple card is attractive, but not always exempt from costs or risks, as the ekonomist explains.
How cashback works
Cashback corresponds to the return of a percentage of the amount spent on purchases on certain credit cards. This percentage may vary between 1% and 3%, depending on the issuing entity and the contracted conditions.
For example, as the same source explains, a 100 euro purchase with a card that offers 2% cashback results in the return of 2 euros. This return can take the form of credit in the statement or become points, miles or discounts.
There are banks that restrict cashback to certain expenditure categories or establish maximum monthly return limits.
What should analyze before opting for cashback
Not all cashback cards are advantageous for all user profiles. It is necessary to consider the annuity, the TAEg (annual global charges rate) and the frequency with which the card is made.
If the returned amount does not make up for the associated charges, it may eventually pay more than what it receives in return.
Before adhering, the publication suggests that it should verify the specific conditions in the contract and to evaluate whether it makes sense to its consumer habits.
What is Cash Advance
Cash Advance, as the ekonomist explains, is a functionality that allows you to raise money with the credit card. In practice, it is an advance of funds, with charges similar to those of a short-term loan.
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It is a solution normally used in urgent situations, but which causes high interest rates and additional commissions by operation.
This value is immediately discounted on the card plafond, reducing the amount available for new purchases.
Charges and risks associated with cash advance
Cash Advance commissions usually include a fixed survey rate and a percentage about the requested amount. Taeg applied to this type of operation is usually higher than card purchases.
According to the same source, in abroad surveys, costs may increase due to international committees charged by bank institutions. As such, this type of advance should be used only in exceptional situations and with full knowledge of applicable charges.
Where to consult the costs
The charges associated with cashback and cash advance are discriminated against in the prices of banking institutions, as explained. These should be available at counters, banks sites and Banco de Portugal portal.
Banco de Portugal also provides an online commission comparator, where it is possible to compare the costs practiced by different banks in services such as Cash Advance for this, just select the option “for service”, then “Credit Card” and, finally, “Cash Advance”.
Understanding both concepts allows more efficient use of bank cards. Cashback may represent a small gain as long as it does not imply higher costs.
Cash Advance should be considered a last resort solution, as it represents a credit with less favorable conditions.
When making informed decisions, the user can avoid unnecessary charges and maintain control of his personal finance.
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